Image  source: Pexels

Table of Contents:

• Best Trading Strategies for Novice Crypto Traders to Start With
  • Types of Crypto Traders
    • Day Traders
    • Scalpers
    • Swing Traders
    • Position Traders
  • The Best Crypto Trading Strategies for Beginners
    • Trend Trading
    • Range Trading
    • Breakout Trading
    • Golden Cross and Death Cross Trading Strategy
    • HODLing Crypto for Passive Income
  • The Bottom Line

Best Trading Strategies for Novice Crypto Traders to Start With

Trading strategies can be as simple as riding the prevailing trend. For novice crypto traders, the simpler the strategy, the better! But in a market where volatility can hit and hit hard, novice traders may be discouraged from taking any positions, or worse yet, freeze fear, uncertainty, and doubt. This means that a proper trading strategy could be the difference between long-term profits and blowing up your capital.

Well, before you identify which trading strategy is suitable for you, you must first determine the type of trader you are.

Types of Crypto Traders

Traders can broadly be categorized as day traders, swing traders, scalpers, or position traders.

Day Traders

As the name suggests, day trading crypto involves opening and closing positions within the same day – typically, no trade remains open for more than 24 hours. The primary goal of day traders is to capitalize on the prevailing daily trends, ignoring the shorter-term market fluctuations. That is why day traders only make 1 or 2 trades a day.

Scalpers

These traders open and close positions within short intervals, usually from a few minutes to a couple of hours. Scalpers heavily rely on technical indicators to take advantage of short-term volatility – they live for the “market noise.” High leverage and more trades are used to maximize profitability from the short-term market fluctuations. Given the heavy reliance on technical indicators, high leverage, and capacity to sustain losses, scalping is often a reserve for more experienced traders.

Swing Traders

Swing traders intend to capitalize on short-to-medium-term price trends, also called price swings. Typically, most swing trades last from a few days to weeks. The logic behind swing trading is to capitalize on trends that take shape over longer periods while ignoring periodic volatility. Sentiment and fundamental analyses are the bread and butter of swing traders. Still, just like scalpers and day traders, swing traders have to rely on technical indicators to identify trends and momentum.

Position Traders

Position traders are akin to investors. These traders hold a position for long periods – months or even years. In the crypto market, these are HODLers. Since their investments are long-term, they conduct thorough due diligence on the cryptos they invest in, scrutinizing the utility of the underlying blockchain to weed out shitcoins from real goldmines. They do this by analyzing the on-chain metrics, transaction value, and a deep-dive of the whitepaper. They rely on the blockchains’ utility, with volatility playing little or no part in their decisions. While HODLing crypto anticipates the price to appreciate, crypto lending offers the best avenue to earn passive income.

The Best Crypto Trading Strategies for Beginners

Now that you know the types of traders, let’s discuss the best trading strategies for novice crypto traders.

Trend Trading

If you are a day trader, the trend is your best friend! Trend trading is one of the most common and simplest trading strategies. All one needs to do here is identify which direction the market is moving, whether bullish or bearish, and then ride it until its momentum dissipates. This means that this strategy will rely heavily on technical indicators, specifically trend and momentum indicators.

The trend indicators are used to determine when the trend is beginning or how far it has developed depending on the timeframe you’re trading. The most popular trend indicator includes the moving average. A trend can also be identified by drawing trendlines on different timeframes to establish the dominant trend.

On the other hand, the momentum indicators will tell how strong the observed trend is, which is especially useful when deciding the exit point. The most popular momentum indicators for novice traders include the RSI, the MACD, and Stochastic oscillators. Typically, day traders trade on the daily or 4-hour timeframe.

When trading altcoins, it is worth keeping an eye on BTC; it always tends to pull the overall trend in the crypto market. But this is not an exact science either.

Range Trading

Range trading involves trading in markets that have no discernible trend, usually called sideways markets. The primary goal here is to establish long-term support and resistance levels where prices are bouncing off. Ideally, traders buy when the prices bounce off the support levels and short when the prices bounce from the resistance. Traders can also use this strategy to execute pending orders.

For beginners, range trading can be one of the easiest trading strategies to master, provided the support and resistance levels are identified correctly. It is more suitable for every trader since the support and resistance levels are identified on varying timeframes. For day traders, the range can be identified with daily or 4hour timeframes; for scalpers, the range could be on a 30-minute timeframe, and for swing traders, the range is on weekly or monthly charts.

Breakout Trading

In the financial markets, there are essentially two phases – the trend phase and the consolidation phase. While liquidity declines in the consolidation phase and the future trend direction is uncertain, the market shows a clear direction in trend phases. Breakout trading is quite similar to range trading in that they both heavily rely on support and resistance levels. However, with this trading strategy, traders only open positions when the price successfully breaches the support and resistance levels. We’ve already covered the trend phase, and usually, the trend phase begins with a breakout after a consolidation phase. Note that the consolidation phase is when range trading is done.

Breakouts are often preceded by periodic consolidation. These breakouts can be bullish or bearish. A bullish breakout occurs when the price successfully breaks above the resistance. Here, you can time your entry when the candle closes above the resistance level.

For bearish breakouts, the price begins to break below the support level after a consolidation phase. The entry for a short position is set for when a bearish candle forms below the support.

Always wait for the breakout candle to close above or below the resistance and support levels, respectively, to avoid any fakeouts.

Golden Cross and Death Cross Trading Strategy

This trading strategy uses the crossover of two moving averages (MAs) – 50-period MA and 200-period MA – to establish price divergence or convergence. This strategy is often recommended for longer-term traders since it effectively establishes trends over a longer period, usually with daily and weekly timeframes.

The golden cross indicates a bullish market is taking shape. This occurs when the 50-period MA crosses above the 200-period MA. This means that the short-term price momentum (the past 50 candles) is increasing faster than the longer-term momentum (the past 200 candles). A successful golden cross is a signal to go long.

Conversely, the death cross signifies a bearish market; it occurs when the 50-period MA crosses below the 200-period MA, showing that the short-term price momentum is dropping faster than the longer-term momentum.

HODLing Crypto for Passive Income

The mainstream acceptance of decentralized finance (DeFi) has come with unlimited potential to earn passive income. For beginner traders who don’t have the expertise of technical or sentiment analysis to cope with active trading, crypto HODLing offers the best opportunity to earn passive income. The best way to earn passive income with crypto is through staking, crypto lending, and yield farming.

Crypto lending is as simple as it sounds. You lend out your crypto holding, and in turn, you receive periodic interest payments. On the other hand, yield farming is a decentralized, collaborative mechanism in which participants use their cryptocurrencies in a pool to build liquidity in a market for specific tokens. Providers are rewarded for providing liquidity. The reward usually includes a portion of the transaction fees and interest. 

The Bottom Line

The best crypto trading strategies for novice crypto traders are inarguably the simplest ones. The first step towards finding the best trading strategy begins with following general trading tips and identifying the type of trader you are: day trader, scalper, swing trader, or position trader. And you don’t have to pick one trading strategy right away, just go slow and keep re-assessing what until you find out which works out best for you.